Case Study #7: What it looks like when everything financial goes wrong

A couple of months back I was walking the dog on a beautiful Fall afternoon. As I sat on a bench enjoying the sun it occurred to me it had been a very long time since I had spoken with my pal Tom.

As I dialed, I really didn’t expect to reach him. Seems while we all have phones with us every moment of every day we never actually answer them. At least I am hard pressed to recall the last time I didn’t wind up in voice mail.

But answer Tom did, barking his last name into the phone by way of greeting and sounding every bit the crusty Marine he once (and by Marine standards still) is. I had forgotten this answering style of his and, were I not as manly as I am, I might have dropped the phone in terror.

Tom’s an interesting fellow. A hard living gun collecting Catholic life long liberal Democrat Marine. A man of faith. He’s a tough guy in the best sense of the term, relentlessly cheerful and there’s not a complainypants bone in his body, as you’ll see. He was a former customer of mine back in the mid-1990s and we’ve been friends ever since. I like my friends eclectic.

Now in his mid-sixties Tom’s had a robust life, filled to the brim with experiences. He’s the kind of guy who, like me, sometimes feels the need to tell people in power to go f-themselves. Unlike me, Tom’s willing to do it without having F-you Money. Working without a net you might say.

Catching up together he told me he had just lost his house to foreclosure, gone thru bankruptcy and almost lost his treasured antique gun collection to the court before scraping together the cash to buy it back. He was laughing while he told me all this. That’s Tom. But the fact that he was also in the process of moving in with his gorgeous Swedish girl friend probably didn’t hurt.

As we talked about all this, I decided his was a story worth sharing. Gracious as always, he agreed and here it is unedited except for adding some illustrations, a bit of name disguising and formatting.

Even a Marine can get thrown…

Tom’s story:

1947 to 1969 –

Lived at home with my brother; children of two, strict Catholic, children of the Depression – to say we were repressed is probably an understatement.

We were both taught to save … I started to work at 13, in a retreat house refectory. I saved every dime in a local savings and loan … it was cool to watch the deposits build up little by little.

I went to a Catholic grade school and an all boys Catholic high school. Both cost money.

In 1965 I started at Wayne State University. I had some help from my folks, but paid for books, transportation, lunches, etc myself. I lived at home and commuted.

I worked every summer as well stashing money away for the next school year. I dated, hung with friends and had an active fun college experience even though it wasn’t at the ivy covered walls of a major university away from home. I thought it, at the time, to be, well, normal.

In 1968 I bought my dad’s used 1965 VW for $500. I finally had “wheels.” When I graduated, I had $2000 in that savings and loan.

In June, I graduated, In August I got married to my little Irish lass, MA. In September I reported to active duty at the Basic School, USMC Training Center in Quantico, VA. Life was good and I was finally on my own.

1969 to 1992 – The “MA” years –

After living that restrictive, home all the time, life with my parents, I was free at last and MA was pregnant. I was going to be a father.

I started to want things my parents would never let me have. A brand new Pioneer sound center complete with amp, turn-table, reel-to-reel, cassette player, top-of-the-line speakers, etc. Found an old oak roll-top desk I liked for $300. etc.

The two grand melted away; but I was an officer in the Marine Corps. I had a regular paycheck of $5,000/year. Saving some how didn’t seem too critical, retirement was 20, 30, 40 years away. I may not live that long.

Pretty soon we had two daughters and we were living paycheck to paycheck. Credit was easy to get and easier to use. We started to build up a little debt, not much, but a grand or two. didn’t seem like any big deal.

Got out of the Corps in 1973, got a great job with M-corp for $12,000/yr. Two grand more than I made as a 1st Lt in 1972 (oh, in 1972 B was born too – I now had two wonderful daughters). Wow, I had this great job back home and I bought a house in Detroit for $20,000.

Did a fine job at work and in 1976 got promoted to Field Development Manager. (wasn’t sure about leaving our friends, family, etc. Went to Chicago, went to mass at the Cathedral one Sunday and prayed to the Lord to ask if this was right for my young family. The usher interrupted my prayer and tapped me on the shoulder and asked if my wife and I would take the offering up at the Offertory. I took that as a sign, as a “Yes.”

Took the promotion and moved to Chicago … still had a little debt … couldn’t seem to pay those damn cards off completely every month. Sold the house in Detroit for $18,000 (learned to buy high and sell low).

Did sign up for payroll savings. Our new old house in Naperville, IL cost twice as much a month as our house in Detroit, $40,000. Mortgage payment was twice as much, and obviously I wasn’t earning twice as much … had to commute into the loop every day. Still, it was a great community, right in the old part of town.

Still, costs were increasing while income wasn’t keep pace. Had kids to raise, had to “keep up” after work, in the neighborhood, etc. Think my payroll savings were about 5% of my income, maybe 6%. Wife decides to go back to school. Had my first college education to pay for.

1979 or 80, I left M-corp to work for V-corp (as Office Manager), visual techniques, a slide presentation house in Chicago with customers like McDonalds, etc., for like $35,000, more than $10,000 more than I was making at M-corp. Sounded like a good deal … I took it; except it only lasted for a year … my first set back.

Conflict with the two owners, they didn’t like the direction I was taking the office. I scrambled and M-corp took me back. They were more faithful to me than I was to them. Still, they knew I was talented and hard-working. I was now the Advertising/Sales Promotion Manager at $27,500. They even bridged my time so I didn’t lose my ability for vesting.

In 1983, a couple of months short of my 10th anniversary at M-corp (and vesting), I was pursued and wooed by R-corp in Bridgeport, CT. They treated me like a king, MA and I loved the area, the job was a new challenge, seemed like the right thing to do.

I even had another sign from God that it was the right move. A rainbow this time.

Sold the house in Naperville for $60,000. Off to New England in 1982. Bought a house for $85,000 in Newtown, CT, used the $20 grand as the down payment. Loved it.

Job lasted two & 1/2 years, R-corp went bankrupt due to asbestos litigation. Bummer. Still, that year (1984) I got a call from a friend who worked at RR-corp. He wanted to know if I’d like to talk to a recruiter in New York about an opening as a VP at RR working on the C-corp business. I said sure. In 1984 we headed back to Detroit.

Bought a home in upscale Birmingham, MI for $120,000. Wife now had a job at DT-corp as an auditor. RR helped get her transferred to Detroit as well. We were on our way.

Two jobs, nearly $90,000/yr. Wow! Things went well, girls graduated high school, went on to MSU, now had two college educations to pay for, work was hard, wife and I hardly saw each other, etc. In 1987, my dad died; in 1989, my mom died.

In 1990 MA asks for a divorce. What? She said I was mad all the time (maybe I was just sad). Didn’t know what I was I guess, except i didn’t want the divorce, like a man has any say in that. Anyway, after the dust cleared I still had a job, had to sell the house, didn’t get much more than we paid for it (those were recessive years), and I walked away with about $24,000 left in my personal nest egg after she took her half, we paid the lawyers, etc..

I put the money left in 4 diverse money market funds and let ’em alone. In 1990 I met A at work. 23 years my junior. She loved me, I rented a house in B’ham and she moved in. We had a ball. Life was good again.

In 1990, RR took me off C-corp (where I was happy) and put me on new business because I was “so good at it.” I hated it. In 1991 I asked for some time off, I was burned out and I wanted back on C-corp. They said “no,” I said I quit. A and I loaded up a ’89 Jeep Cherokee and set off to see the back roads of America. We traveled all of 1992, camping and back-packing. I do it all again.

1992 to 2006 – The “A” years –

a new young lady, a mate for the rest of my life. That’s what I thought. The year off taught us a lot about each other, we loved each other, we knew we’d make it. No job, but who cared, we’d find something, and finally in 1993, we did.

By then A was pregnant with our first son, A, I found a job with an old buddy rep-ing auto parts and pickup truck bed-liners in Baltimore. We bought an end row townhouse in Towson, MD, and settled in. G was born and all seemed well, until my boss said he couldn’t afford me and my $30,000/yr salary anymore.

No problem, I found a new job at a little ad agency in Winchester, VA. Sold the house in MD and rented one in VA. Good move, because that $40,000/yr job only lasted a year.

Did I mention, I had to cash in my money market funds one at a time between 1992 and 1996 to survive, for down payments, etc.?

It’s now, 1995, I find a great new job in Ohio at U-corp calling on an old RR client, FM-corp. I knew this was going to last, so I bought a nice house in Cuyahoga Falls. And, oh yes, Z, my second son was born there. happy we were … until 1997 (P.S. I’m 50 now and starting to worry about retirement;-).

I couldn’t stand my boss and the owner of U-corp anymore. I started looking again. Thank the Lord, I earned a $20,000 bonus in 1996. Money in the bank … paid off credit cards, etc.

Guess who wanted me back in Detroit. Good old RR. Off we go, one more time. Motown here we come. Back on C-corp, back with our friends (A’s and mine), happy we are … we buy a house in 1998 in Milford! Wow, my home from 1998 until 2013. Longest place I ever lived continuously. Used what was left of the U-corp bonus as the down payment.

Everybody was making money and life was good. I got back to the ad agency grind and A stayed at home and raised the boys … until 2002 or so when she starts back to college at Eastern … another college education … no problem, we’ll just refinance, the house is appreciating.

A buddy of mine from BB-corp becomes President at YR-corp and he wants me to join his team as a VP … an honor and more money. Off I go to YR, well that lasts two years until he gets canned and of course all “his people” get the ax too. Out of work in 2001. Takes me almost a year to find a new job.

When I left BB and went over to YR, following my buddy M who became CEO of the Detroit office, I took around $40,000 in 401K money. In 2 years or so I managed to add another $50 or $60K. On M’s advise, I invested that $$$ with a money manager for one of the big investment companies. In a couple of years he lost about $80,000 of my money. That hurt. He kept telling me it was just a blip in the market, it would come back (e-boom and bust time period). Anyway, easy come, easy go;-) (jlcollinsnh: another reason I don’t like money managers)

80Gs down the drain. Thanks for the professional advice.

Spent money I had set away for retirement. Now 55 with a young wife, two sons and no nest egg. Guess where my new position is? back at BB, but this time as a lowly Account Supervisor. I am being punished.

They put me on the C-corp business. I work hard and help build the business. They finally promote me to VP again in 2003. Making $80,000/year, $1,400/year mortgage, helping A through school. She graduates in 2006 and guess what … she files for divorce. takes half of what I have in my 401K, I think the house is appreciating, I keep that, buy her out of her half. Pay lawyers, etc. Child support … life gets kinda sucky.

To make things worse, in 2008, the bubble bursts, I’m screwed, C-corp goes bankrupt, fires all their vendors, sticks everybody with debt and now I’m 61 and no one wants or needs a 61-year-old account man. I’m saddled with debt, get deeper in debt, house depreciates, can’t sell it.

I hang in with part-time jobs, Michigan State Unemployment Insurance until 2012 when the answer hits the proud old Marine officer … I have to file for Chapter 7.

I take my SS at 62, since I can’t wait until 65. I collect a small VA benefit of $132/month for hearing loss during my USMC years. I also have a $400/month pension from RR.

The C years –

I find the Swede, fall in love again, find a part-time job at a museum and historical farm as a historical presenter working on the farm and life is good again. Since I don’t have $$$, I have learned not to worry about it.

I have my health (and VA Health Benefits), great friends and relatives, wonderful kids and grandkids, a job I love that gets me outside and provides plenty of exercise, a roof over my head and a woman who loves me. What else do I need?

I make about $2,500/month with my PT job, my VA benefit, my RR pension and my Social Security. I’m a lucky guy.

What we have here is a talented guy with solid contacts and strong career performance who found himself without a chair when the music stopped and he was past the age employers prefer. Add in a couple of expensive divorces, multiple kids, a disastrous run with a money manager, the implosion of 2008 and growing debt and you have a guy reaching the finish line just as his financial world collapses around him. It’s enough to drive a man to drink.

Or not.

Where in many such a run would trigger an intense wallow in the complainypants mud pit, in Tom it simply rolls off his shoulders as he cheerfully moves on. Tom knows he has what is truly important in life: “…my health, great friends and relatives, wonderful kids and grandkids, a job I love that gets me outside and provides plenty of exercise, a roof over my head and a woman who loves me.”

My guess is he has all those things because of his attitude. Tom’s a guy you want around. As a friend, as an employee and, at least in the case of the beautiful Swede, as a lover.

He’s had a full and varied life. A life that accumulated a little pension, a bit of VA comp and SS. Along the way, he’s learned that stuff just ain’t that important. And once you no longer value stuff, the good life just ain’t that pricy.

Something to think about the next time you are worried about the 4% rule working out or having gotten a late start on retirement planning. By all means plan, save and invest for your future. But keep in mind mental toughness, the ability to roll with the punches and lifestyle flexibility are where true security lies.

While I didn’t think about it as I prepared this post, several readers commented below how financially damaging home ownership proved to be in this story. A real life illustration as to Why your House is a Terrible Investment.

Great story and some very worthwhile advice from all involved. I love the points about living with less and focusing on relationships over “stuff”. I’m also amazed by Tom’s ability to live such a mobile life with a family in tow. Hard to do that with lots of unnecessary possessions on hand. Reminds me of the wisdom in one of David Cain’s recent posts on raptitude.com (“Everything In It ‘s Place, Now and Forever.” )

So as not to armchair quarterback Tom’s decisions in an effort to apply lessons to my own life, I’d love to hear what advice he has based on his story. Above and beyond his very wise comment about the value of relationships over material desires, that is. With all the forks in the road that he faced, I’m sure he developed at least an unconscious list of rules to live by that have helped him maintain such a positive outlook and ability to attract quality people in his life. I say this based on both his successes and his failures, as lessons obviously can be learned from both.

Tom:

Hey, Tom here. In response to Deacon’s request, I have a few rules I live by …

#1. Seek the truth; there is a lot of deception in the world. Learn to find out what is true and what is false. It takes some effort, but it’s worth it.

#2. Get outside everyday and breathe fresh air, get some exercise, even if it’s just a nice long walk.

#3. Look everyone in the eyes when you talk to them; it will instill trust in both parties and you will learn to read others’ responses.

#4. Tell the ones you love (family and partner) that you love them.

#5. Simplify, simplify … Thoreau was right. We sure can’t take all this stuff with us.

#6. Work at a job you love and put your all into your work. That being said, don’t take your work home with you. Take time to unwind.

#7. Eat healthy, have a drink daily, but don’t overdo either.

#8. Be thankful for the things money can’t buy.

#9. If you have kids, take them fishing, camping, whatever. Show them there is another world out there that has nothing to do with electronics or stuff.

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Comments

Pretty cool story and sometimes I envy people who can let things roll off their shoulders like that. I wonder if I would have been less of a miserly bore if I spent more and lived it up more, but then I look to my looming retirement and think “they will work 20 more years” and feel better. 😀

Great story and the punchline is so true… all that worry won’t make things turn out any different, better to be mentally tough and flexible. I have enough to retire now, just need to stop worrying about all the other details (will the stock market hold up, will the 4% rule hold up) and concentrate on my health, my family and being grateful for all I have.

Your reply hits right on target with me. It wasn’t until about a year ago that I took the time to sum up all our assets and created a solid investment / spending plan in detail on a spreadsheet, and bounced it against all the planning / analysis tools I could find (FIRECalc, Vanguard’s complimentary financial plan review for Voyager customers, etc.). It confirmed that, as you said, that maybe we “won the game.” I pondered, why should I continue to play the game of fulltime employment? Over the last several years, I had made it through eight rounds of layoffs at my employer. So late last summer, when the next layoff was announced, I told my spouse and my manager that they could select me. I signed off on the separation package. Truth be told, I’m still nervous about living off our lifetime of investments, the impact of future healthcare costs for early “retiree’s” and the uncertainty of the stock market. My separation package is coming to an end within weeks and my spouse is planning to retire later this year. So when in doubt, I pull up my spreadsheet and look at the planned initial withdrawl rate of 3%, and see the probability of not needing to touch the principal. Maybe, just maybe, all these years of average frugal living has paid off. We will soon find out…

This guy is a fighter, he seems to bounce back really quick each time he gets knocked down. How could you not like him. Someone rich should become his patron, set up a trust or something, so that he is never broke again!

Seriously though this is why I am starting a disciplined rational investment program while I am in my early 30’s. I am watching my parents go through something similar, having to work into old age due to the consequences (spending, divorce etc.) of their youths.

Jim, thanks for sharing the ole Marine’s story. It puts “failing” early retirement in context. Depleting an investment portfolio 10 or 20 years into a blissful early retirement doesn’t seem so bad after seeing the repeated knock downs your friend Tom suffered, only to stand back up for another fight to “win” at life.

I’m spending 3% of my portfolio and even though I’m still in my 30’s, there’s a chance I can spend the investments down to next to nothing. In the meantime, I’m sitting on a 33 year “emergency fund” that yields a little less than 3%, so I’m not too worried. But probably more worried than Tom, who has the benefit of hindsight and knows everything will work out in the end as long as you have your health and a Swedish sweetheart.

This is one of your best articles. It’s inspirational and hits the core of what is essential in life to live happily. Life is larger than accumulating wealth. Tom proves that true reflection of our character is measured by depth of our attitude.

Great story. My parents are a similar case in that they made a lot of money over the years, but either made poor financial decisions (buying before having the cash) or had unfortunate timing. Now they are in their 60’s without a lot, but happy. If people can realize they don’t need a lot in their 20’s and 30’s financial independence is much more manageable.

One key financial takeaway – having a home can be a great wealth destroyer if you don’t plan to stay put for a long time.

I love your friends attitude throughout all this. The timing seemed to be very unlucky for some of those decisions (e.g. – keeping the house in 2006 and buying out his former spouse). And, additionally, the transaction costs of all the home purchases and sales could not have helped. Makes me wonder if we should just rent…

Regarding houses, they are most often an expensive drag if the goal is FI and, as I said in reply to TK’s comment above, best viewed as an expensive indulgence.

As you know, I’ve indulged myself, owning houses for 28 year. Just last year returned to the blissful life of a renter. Carefree, flexible and even after running the numbers, I am still a little stunned at the actual savings.

First of all, awesome post- made me both sad and hopeful at the same time. A lot of the comments (and rightfully so) have pointed out some of the pitfalls of serial homeownership in this case- not only are you at risk for market depreciation but even if the market appreciates there are still substantial transaction costs involved with buying and selling houses.

But what has not yet been discussed (yet) are the impacts of two divorces. I realize that this is less controllable than a decision of whether or not to buy a house, but divorce is also a huge destroyer of wealth (and other aspects of life). It seems like most people I know who are Tom’s age have been through at least one divorce, and every time they say it’s like hitting the reset button. I guess the takeaway for the young people out there is to be as sure as you can possibly be before you jump in and get married. Even then, people and circumstances change, and life may have other plans for you.

Personally, I’m far more fearful of the potential financial consequences of divorce than I am of making a “bad investment” on a house. My wife and I are celebrating our 10th anniversary this April- hope we keep it up for several more decades!

In my opinion it depends mainly on what one does after that. Many people rush to start new families and their dependents multiply. Raising two sets of kids, one after another, is what is expensive, not so much the divorce itself.

So if you worry about a divorce and its consequences, there is a simple solution – vasectomy 🙂

I had the same response, and hesitated about commenting because I want to be sure that what I say is taken as ‘what came up for me as I read this’ and not ‘this is where I think this person went wrong’. BUT as an economist with training in marriage therapy I’ll say that I am always amazed at how many people are oblivious to the connection between their financial health and the health of their relationships. jlcollins regularly talks about being able to watch the stock market wipe out half your wealth – same scenario as many divorces, but there are lots of ways to protect against them which are less mysterious than trying to time the market. Firstly, the peerless Al Turtle: http://www.alturtle.com/archives/1273 – know what is going on in your relationship; secondly, learn to talk easily, openly and regularly about finances. And if talking about money with your partner is too difficult, then talk about talking about money and why it is difficult… because practising talking is good for your relationship, which in turn is good for your finances.

Great story. I work in Ann Arbor and am curious where Tom works. I am getting married this August at a “barn” and the historical farm looks like a place my fiancee might want to take photos there. If he doesn’t want to say here, personal email works for me.

Wow Jim what a story, what a life. I couldn’t stop reading to see what unfolded next. I have been self employed at the same occupation for 32 years and feel so blessed. I definitely worry too much, I have tons more in financial capital than Tom but still worry about some type of collapse of the markets. Great lesson in it really doesn’t take that much to have the essentials, so long as you have food, shelter and love that is what is really important.

Thanks for sharing! My parents are going to be in a similar situation although not for overspending. They are actually extremely frugal. But they are immigrants and haven’t really had any benefits throughout their working career in the states. My brother and I are going to support them in their older age.

Great story and some very worthwhile advice from all involved. I love the points about living with less and focusing on relationships over “stuff”. I’m also amazed by Tom’s ability to live such a mobile life with a family in tow. Hard to do that with lots of unnecessary possessions on hand. Reminds me of the wisdom in one of David Cain’s recent posts on raptitude.com (“Everything In It ‘s Place, Now and Forever.” )

So as not to armchair quarterback Tom’s decisions in an effort to apply lessons to my own life, I’d love to hear what advice he has based on his story. Above and beyond his very wise comment about the value of relationships over material desires, that is. With all the forks in the road that he faced, I’m sure he developed at least an unconscious list of rules to live by that have helped him maintain such a positive outlook and ability to attract quality people in his life. I say this based on both his successes and his failures, as lessons obviously can be learned from both.

Thanks for the response Tom, and to jlcollinsnh for the addendum. Very wise words to live by. I have to say that my #1 and #2 would be exactly the same. Interesting how certain life events will cause me to remember or re-evaluate certain of my own ‘rules’, but these two (and maybe a couple others) are constantly in focus. Thanks again for the words to live by.

That’s a good yarn, and good lessons on focusing on what’s valuable now: relationships, friendship, a worthwhile and rewarding pursuit, and satisfaction with having basic needs met. If FloridaStache hadn’t pointed out that divorces are expensive, I would have. Unfortunate and sad (especially w/ children involved) and heavy financial setbacks to boot.

Second Deacon’s request above: lessons learned from those who’ve been through them are valuable.

Wow! What a fighter this guy is. So resilient, most people would have given up a long time ago. Thank you for sharing his story. It really makes you think. I am struggling with the home ownership bit. Since we longer live in the states, we are considering selling our house. We had rented it as we weren’t sure if we would decide to come back soon. We like it here however, and even though there is a profit after all expenses, it is a big mortgage , if it sits unrented for a while, l would hate to throw money down the drain. We are leaning towards selling and just keep the second smaller house. Smaller mortgage and rented to a long time renter. Decisions..decisions..

Thanks for the link. Plugging in my numbers pointed me towards what l already knew , even with the profit. It’s a rainy day here and have spent it reading through your blog. I can’t think of a better way to spend the day. Thanks a lot. I’m glad l found you!

Tom here, summer of 2017. I have this inexplicable problem of not learning from my mistakes. This past November, the Swede and I parted company. I won’t go into detail, but the parting did revolve, a little bit, around money and who was in charge of it. We parted friendsome though. That’s good. You’ll all probably laugh out loud, but at age 69, I bought another house (with a VA loan). Two weeks after I closed on my new place, I was diagnosed with aggressive prostate cancer. I have had a radical prostatectomy and So far so good. My cash flow is better now than a year ago. I still work on a historic farm and we just harvested wheat with an 1880 Johnston reaper. You may chuckle again, but I’m as happy as I have ever been. My family and friends have really stepped up and helped me through this “test.” I turn 70 next week (big party), and right after that I will go on my annual fishing trip with son, grandson and best buddies. Life is good. I hope you’re all well and know, you’re tougher than you think. Semper Fidelis folks.